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Tnooz Predictions 2012 – The biggest and best list in travel technology

Tnooz is lucky and privileged to have some of the brightest minds in the industry reporting and contributing to its service almost every single day of the year.

For the third year in a row, we have peered into the Tnooz crystal ball, reached into the depths of our knowledge and experience of the industry in order to come up with the biggest, most well-informed list of predictions you will find anywhere on the web.

1. Non-transactional travel startups are going to continue to struggle

Social, trip planning, itinerary sharing and mobile city guide startups and apps are wonderful artistic creations that can be a joy to use and engage with. Sadly business models for these endeavours have not kept pace.

Their less glamorous relations – ie. transactional based startups – are at least handling money, and bookings hence tend to be able to generate a sustainable business from a percentage revenue share.

Consumers may pay to save money, suppliers will pay for receiving bookings they would not otherwise have had. These companies can even make money on the transfer itself. Less exciting, less press coverage but in 2012 much more likely to keep their heads above water.

2. Web tech will improve the overall experience not just the booking experience

Hipmunk has it right with its “agony” metric, but this approach can go so much further.

What stops you from travelling to a tricky country? It can be visas, immunisations, paperwork and bureaucracy. How many websites or services do you see streamlining these consumer burdens?

Too much focus has been on the product and the booking – 2012 will see the rise of the holistic travel website with incorporated 1:1 personal advisors and trip planners. No longer will 1:1 advice be for luxury travel only.

After years of acting as catalogs of travel products, online sellers of travel will finally leverage the mountains of data they’ve been sitting on to effectively target and sell to customers based on their preferences.

The emphasis on optimizing travel sites to be the most appealing to everyone will be replaced by an emphasis to make them individually relevant. Expect the trend to begin with OTAs.

2. Travel startups face funding headwinds

After experiencing a flush funding environment the past couple of years, travel startups will find it harder to raise money in 2012 as a glut of seed funding turns into a rush for follow-on funding with much less money generally available.

The economics of operating a travel startup reliant on SEM will become more unrealistic.

These trends form the new methods of consulting information: media consumption on many screens (web, billboard, mobile, tablet), at any time of day.

With services from Google TV, Apple TV and the like, market will be on a rush. The digital strategy of tourism stakeholders will need to take more account of the myriad of additional screens in a consumer’s life, and the proper implementation of multimedia storytelling.

In fact, as so often happens, innovation comes from outside the travel industry as large tech players who provide integrated customer experience.

2. China outbound market still growing and evolving rapidly

As I said in 2010 and 2011, Chinese outbound market represents a huge potential.

Chinese travelers are seeking true individual experiences and would love to leave the flock. To capture this lucrative market, we will see more digital marketing from travel brands on the Chinese web and social networks.

This strategy is already being used by organisations in Canada, Australia as well as some luxury hotel hotels.

The giants in this battle are not only Google, Facebook and Apple, but anyone who can control the input/output of end of user interaction: device manufacturers (watch Nokia), large content publishers (watch Amazon), and private platforms (watch Gilt and LivingSocial).

1. Priceline, Expedia and other big OTAs will get into the vacation rental business in a big way

It’s a natural fit as they expand their hotel businesses globally. This won’t be couch-surfing or peer-to-peer strategies so look for them to skew toward partnerships with distributors of professionally managed properties as TripAdvisor, which is separating from Expedia, already has done.

There will be a variety of models, including listings and commissions. There will be partnerships and, with lots of money lying around, acquisitions, too. There’s a whole new lodging world out there and the OTAs will want in.

2. Rock, paper, scissors

On-demand car services will beat rail in terms of buzz factor in 2012. The proliferation of mobile is a natural fit for on-demand car service, where you can text or use a mobile app to call for a ride, and view your driver’s location en route on an interactive map.

Uber, Limos.com and GroundLink are all doing innovative things. This highly fragmented industry, which might make hotels look like the picture of consolidation, has so much growth potential.

And, of course, these car-service players will be busy in 2012 further developing inroads into the business travel side of the industry.

Google Hotel Finder and Google Flight Search emerged on the scene in 2011 to much fanfare and discussion. But at the end of the day, Google does not offer the best solution for either — with overly complex tools that have too much friction to transaction.

Google will remain a trusted source of search results to find OTAs, but OTAs and dedicated travel meta-search sites will not feel too much heat from Google anytime soon. World order will remain.

2. No winner in social travel

We’ve been introduced to scores of social travel start-ups in 2011. Some are well-funded, others bootstrapped experiments. The bootstrapped companies, like many that came before them, will fall by the wayside.

The well capitalized ones will push on, veering and pivoting as fast as they can (but probably not fast enough). But by years end 2012, no single social-travel site will have critical mass, nor will any have a product and business model that’s sustainable into 2013.

Apple’s iTravel emerges, probably before mid-year. Look for an elegant mash-up of travel aspiration (one with some vision and much better than Google’s Schemer) and Apple’s magic with device design and integration.

iPad will be to iTravel what iPod was to iTunes.

2. New opportunities in mobile

Mobile travel applications explode in number and breadth of services. Look at the mobile games market as a model for the hundreds of thousands of items in the library of how-to, what-to-do and what-people-like-me-recommend-I-do in travel-related stuff.

Real blurring between platform-native mobile apps and platform-agnostic web apps begins to gel. Businesses form around the collection of these applications.

Travel search will take a massive step forward led by startups such as Evature and Hopper [NB: Disclosure – Tnooz chairman Fred Lalonde is also CEO of Hopper]. Apple will take it to another level using Siri to impact the travel sector more so than the vaunted iTravel patents.

Social media influence analysis and metrics will improve significantly and standards and benchmarks will start to be established.

These metrics and benchmarks will help travel suppliers, CVB/DMOs and PR companies give a weighted value to travel bloggers when comparing to travel print journalists. This will provide travel bloggers a quantitative way to gain a seat at the press trip invite table.

Ad dollars will follow, but will be slower to migrate from print travel publications to individually branded travel blogger sites. The migration has started; the analysis tools and metrics will help it gain speed.

2. Airline merchandising

US airlines will hit a wall in unbundled, a la carte ancillary products and will begin to sell re-bundled ancillary package.

Think “fast food”, while a complete menu of a la carte ancillary products will be available, “value meals” and “entrée with two sides” packages will become the popular way for consumers to purchase air, at a discount off of full ala carte pricing.

With a dizzying number of trip planning sites either up and running or in beta, 2012 will be the year that defines the sustainability of the model.

There are simply not enough eyeballs to feed the needs of dozens of trip planning sites littering the web, especially as so many require reviews and recommendations to feed the content that also makes them sticky in search and diverse enough for readers.

A great shake-out will happen during 2012, where those without traction or relevancy will fall by the wayside and a few that have managed to fully understand and leverage the social graph.

And this, of course, is before the mega-brands (which do have eyeballs) finally realise there is some value behind the social graph.

2. Travel startup terror

Investors in the famed startup land of Silicon Valley (and elsewhere) have spent the best part of the last two years throwing money at travel startups.

Some startups breed innovation, all hope to add competition to the marketplace – both elements are obviously good things. But some believe the investment money is now starting running dry.

While this will obviously impact (and no doubt kill) those looking for early stage funding before they even get off the ground, startups needing a second round to fuel the next stage of their growth will be under enormous pressure.

The whole area does little for the credit of the sector and some sort of authentication process to verify consumers posting reviews are genuine guests could solve a lot of problems.

2. Flashy overhaul

A shake-up of the flash deals sector is on the cards in the next 12 months. There are too many companies out there doing the same thing and it’s hard to believe online travel agencies won’t incorporate their own flash deals areas within their websites.

2012 will be the year that seemingly every mobile network operator, mobile phone operating system, card scheme, alternative payment form, and even a few major retailers and mass transit operators claim to have THE digital wallet solution that will see us all moving payments to our phones.

The reality is that even though the coming year will be a land grab of sorts, most will find it harder to be genuinely relevant to both consumers and merchants. Towards the end of 2012 we will have a much clearer idea of who is in the digital wallet game for the long haul.

The real impact on the travel industry will take some time to become apparent, but this is undoubtedly a high stakes game worth watching and understanding – the longer term impact will be profound.

2. Strategic view of airline payments

For years the GDS model of authorizing payment for ticket sales has typically used generic acquirer and merchant IDs, thereby not passing in the message an identifier of who will actually settle the transaction.

Despite being against scheme rules this was tolerated for years until recently. But this is just one of many reasons why airlines will be taking a more strategic view of payments in the coming year and relying less on legacy processes.

Whilst the more forward thinking airlines have already separated the card not present gateway decision away from individual market by market acquiring relationships, we will start to see more airlines looking at a co-ordinated approach across fraud management systems (eg. Veuling), alternative forms of payment tightly integrated into booking engines (eg. Lufthansa), consolidated reporting and reconciliation across markets and payment types (eg. Jetstar), and in some cases even on-us acquiring where volume and market conditions permit.

EMV mandates will also help bring airport kiosks into focus as a part of this increased focus on a single payments strategy for the airline.

Google Hotel Finder is stirring things up in the world of hotel distribution. It outmaneuvers metasearch sites such as Kayak, Trivago and HotelsCombined and a lot of smaller OTA and drives business straight back to the top players.

An opportunity for hotels though to get listed through their GDS representation company and regain some control on their distribution.

Hotels have to make sure though their Google Places listing is in perfect shape.

2. Increasing Distribution Cost for Hotels

Hotels will be faced with an increasing cost of distribution in 2012. Quite a few OTAs have raised their commissions from 12% to 15% in major destinations which will come straight out of your bottom line.

Many OTAs have also launched preferred programs for hotels to show up higher in the sort order. Commissions vary from 18% to 20%.

Hotels have to be careful not to simply drive up their costs and at the same time become reliant or even dependent on OTAs. Keep in mind, their only mission is to grow in terms of global revenue, and that is not always in the best interest of your own hotel.

2012 will witness the advent of automated social data disclosure from flocks of travelers sharing their every spatial move by mobile default. These “living sensor networks” will give rise to mountains of new data artifacts as mindless convenience trumps manually optimized privacy.

While the IT poser masses will contribute by elevating “social data architecture” to buzzword bingo status next year, a select few will begin experimenting with structured (spatial) and unstructured (temporal) social data by parsing and combining it with their own, aspiring to 1+1=3.

Intelligent integrations of that data into the travel search experience will produce pockets of context-based conversion increases that will build a case for broader industry investment in 2013.

Travel evokes strong emotional ties based on post-trip memories, but rarely do travelers connect those emotions with hotels, cars and planes during the pre-trip booking process. 2012 will entail the analysis of how gesture browsing could be applied in travel, unfortunately resulting in all talk and no technical walk until 2013.

Conversely, that opens the door for at least one motion technology travel startup to launch next year, experiment, hunt for funding, and rest easy knowing the need to improve the online travel experience remains as ever-present as always.

Even though only about 5% of the population uses location based services such as Foursquare, we have seen location awareness become an important part of many travel based mobile and web applications.

I would expect that Facebook will reveal something interesting as a result of its acquisition of Gowalla. Integration of location and local deals may become more mainstream as part of Facebook mobile app.

Since Facebook has discontinued Facebooks Deals, however, I expect to see daily deal sites and potentially even incumbent travel sites advertising on Facebook for access to users in app.

2. RIP Social trip planning. But not quite

Social trip planning is dead long live social trip planning. My prediction has less to do with technology and more to do with consumer behaviour. In the last two years we have seen a flood of social trip planners appear and disappear.

I think some of this technology will be acquired by incumbents and used in their booking flows and that social trip planning will become part of the planning and booking process of existing and emerging content sites rather than destination sites on their own.

Next year will mark the year that everyone born in 1994 turns 18. Sounds like the dumbest ever prediction made, right? It is significant because 1994 marks the year the world wide web was born, meaning 2012 is the year the first true 100% internet generation comes of age.

By coming of age they become economic entities that get jobs and make their own decisions on where to spend money and when to go on holidays. This generation and those three to five years older than them will fuel another burst of growth in online travel spending.

Combined with the growth of middle classes in China and India, 2012 will see a greater shift in offline to online than we saw in 2011. New products will continue emerge/grow online to catch this wave (ie P2P travel such as Airbnb).

2. It is 2008/2009 all over again (bad news)

2012 will not deliver the economic growth and renewal that has been hoped and predicted. As as a result we will see a general drop in travel demand even as online share increases.

This drop will not be as bad as – but will be a reminder of – the declines in 2008/9. I expect this to drive a drop in travel supply prices (hotel, air, cruise).

Unfortunately I predict that we will see some further announcements by suppliers in the areas of bankruptcy, closing of brands and disbanding of joint ventures.

It will however give deals a big push – both for dedicated deals sites and for the general online travel agent market. Watch the deal market and businesses grow (even if we lose some players along the way)

Due to budget restrictions, lack of resources or simply a realization that building a Yelp clone (but it has our logo!) is not a good strategy, DMOs and CVBs will begin to re-focus efforts on core strengths, while looking to partner with existing technology.

Google loves information. And you know what typically requires a lot of planning, research and information? Yep, travel. So, it is no surprise (and certainly not to our dedicated Tnooz readers), that Google continues to push into the travel space.

Flight Search, mapping, G+ and now Schemer all have connections with the travel planning funnel, which has quietly moved Google from advertising medium to trip planning hub.

Will it be a success? Difficult to say, but if any activity could use some streamlining, it is certainly travel planning. And I, for one, welcome our new travel overlords.

This is my third year including a prediction about the long tail, and it’s always a guaranteed winner because of the ongoing and fast-growing interest in the travel segments that make up the long tail.

Large distributors and suppliers are finally recognizing the logic of extending their value proposition by including information and (sometimes) inventory of tours, activities, golf, vacation rentals, tee-times, ground transportation, bus tours, etc, as part of their offerings.

Technology costs are falling, connectivity is becoming easier, the talent pool is deep, venture capital firms are investing heavily in this segment, and the market is paying attention – a winning combination.

2. Simpler, smaller, scalable, standard

The proliferation of open APIs is a good thing for an industry that has historically been dominated by proprietary (and expensive) connectivity, but bad for an industry is trying to simplify access to data and to support ongoing innovation. As more open but one-off APIs flood the market, connectivity becomes complicated, expensive and time-consuming.

Travel companies should follow technical best practices when writing APIs – discrete but scalable, simple but robust – and contribute to and follow standards whenever available.

2012 will be the year of the open API – and also the year when the travel industry says “enough is enough” and fully recognizes the value of standard connectivity.

The problem is “re-paying” for the re-invention of wheels that are already rolling.

I have a great story about this. One of our local destination marketers got a technology grant and put out a $9,000 RFP for an interactive map to serve about 60 POIs. I had one of my team scrape their data and make their map for them as part of my bid. I mean, why not? It took all of an hour and I offered the DMO the map for free if they used their windfall grant to fund a far more comprehensive solution.

With a free and operating map in hand, they went with another vendor. When they rolled-out their new $9,000 map—a product that any of my university cartography students could have knocked out in a few hours as a class project—the DMO proudly solicited commentary. I happily obliged—linking them to an $89 WordPress template that did interactive maps, websites, reviews, spatial queries, an itinerary builder, and about 20 other things.

There’s a lesson to be learned here that has nothing to do with how to stop scratching my head in wonder. It has to do with a real challenge—folding capacities—many of which already exist—into affordable frameworks the way that mega-players do while adding capacities as means to respond to or drive global destination markets.

Michael Jacques

Agree with the comments that social travel will find it hard to monetize and many will go away. However, I think we’ll see some of these services turn their products into ‘white label’ software services to help suppliers and others move to social.

Also, Alex brings up a good point on personalization. This is long overdue. I think we’ll see travel recommendations pushed to users similar to Amazon or Netflix style recommendations.

1. Facebook, Twitter, Social Media, the hype is going to die down, the dust will settle and those who really have used these channels successfully will continue while the rest will probably drop it or keep it as a side-thought until it starts generating more bookings.

2. Revenue and Reputation Management, is one of the largest factors in ADR and RevPAR and smaller hotels will realize it but will need help to improve it.

3. Hotels will begin redoing their websites. Responsive if they are smart and integrate mobile and desktop into a single marketing push and not an add-on.

4. More OTAs will realize that their future depends on working with hotels as a win-win relationship and not try to bleed them dry (as a few are doing) with last room availability, lowest rates and increased commissions.

5. Google’s new products wont disrupt the business but it’ll start to gain market share slowly but surely.

The biggest no brainer for 2012w must surely be mobile, current trends we’re seeing are amazing, and blow social media out of the water completely. my hotel clients, all 160 UK hotels, are showing monthly growth in mobile/smartphone/tablet traffic of around 1.5-2% – hotels which started the year with mobile &c being 4% of traffic are now seeing it in the 15-20% range. Also there is a great new trend emerging – high convertibility, and direct as opposed to OTA driven sales.

Compare this with Facebook &c – I’ve a major UK city client which was very proactive on Facebook, whose had over 3400 visitors this year via Facebook and not one single booking that can be traced to them. Needless to say, Innfinite is now building a mobile website for them! – and is taking money out of the social media budget to pay for this as it sees where the real opportunities for low cost sales lies. Hotels which are investing heavily in social media and nothing on mobile have their priorities completely the wrong way round.

Alex Edlund

Certainly a nice diversity in predictions.

@Alex Kremer’s prediction about an increase in personalization. This is already happening with on-site retargeting but we can do better and inject more factors into content delivery personalization. OTA’s main function is to quickly provide relevant travel related options to the consumer. We need to do a better job at making it more relevant to the user.

@Evan Konwiser about Google’s impact. This is a big one and I think we’ll have to wait and see. Google has changed the way we use the internet and they have the power to steer users down a certain path. Hotel finder and Flights are only starting to take shape and it will be very interesting to see what techniques Google will employ to drive traffic to these products. Rest assured they will ramp up their efforts in 2012.

Interesting stuff. Would always be good to get the ‘proof of concept’ on all these predictions too. Everyone is quick to make predictions, very few are held accountable for them. Did all your predictions for 2011 come true? If not why not, this would be MOST interesting analysis.

Also, as customers will continue to control our content even more as social applications have empowered the consumer to define our products and services., how about some views and predictions from travel consumers, after all we marketeers seem to now be completely subservient to them. They are in the happy position of neither needing to like us, nor having to do anything about it.

Daniel – good point. I vacilated between a positive and negative set of predictions. In the end I opted for negative because I think these will be among the most significant issue affecting Travel, I also focused on air – not because I believe air is more important but because it has spill out into the other segments of the market.

Since there was no conferring and limited amount of words allowed (thanks Kevin “Bamber” May) it is interesting how the predictions shook out.

There is a lot here for those involved in the Travel category as a whole to ponder. The category is going to go through some turmoil again. One clear sign is that the back of the house is facing disruption can be an inference.